The higher ratings for the National Power Corp. (Napocor) and the Power Sector Assets and Liabilities Management Corp. (PSALM) followed after an upgrade in the Philippines’ sovereign credit score.
“These rating actions come after we raised the foreign currency sovereign credit rating on the Republic of Philippines,” S&P said in a statement.
Specifically, ratings for foreign currency, local currency and senior unsecured debts of Napocor and PSALM were raised to BB+ from BB. The credit outlooks were changed to stable from positive.
“We consider the credit profiles of PSALM and Napocor to be weak and heavily dependent on the support of the Philippine government,” said S&P credit analyst Rajiv Vishwanathan.
However, Vishwanathan said “both utilities are almost certain to receive timely and sufficient extraordinary support from the Philippine government in the event of financial distress.”
To date, Napocor has transferred to PSALM more than 99 percent of its rated US dollar bonds, including the $300 million due in 2028 and $160 million due in 2016.
Outstanding rated bonds of Napocor amount to $452,000 due in 2028 and $133,000 that will mature in 2016 as most debts were shouldered by PSALM.
S&P said PSALM and Napocor play a critical role in implementing government reforms in the power sector and providing electricity to far-flung areas.
The firms also stand to benefit from government control over key budgetary and strategic decisions, S&P added.
“The Philippine government also provides an irrevocable, unconditional and timely guarantee on all debt obligations of PSALM and Napocor,” S&P said.
PSALM is the state agency created by the Electric Power Industry Reform Act of 2001 to privatize government power assets as well as manage power plants and debts of Napocor. It buys the fuel requirements of state-owned power plants.
